MENA Renewable Energy Challenges of Meeting Future Regional Power Targets Dr. Steve Griffiths Executive Director, Masdar Institute Professor of Practice

1

MENA Trends Electricity demands are reaching unsustainable levels
Electricity production growth has outpaced economic growth (GDP)
Electricity production growth has outpaced capacity growth

Rising population Urbanization Economic growth and industrialization

Source: APICORP Research, MENA Power Reassessed: Growth Potential, Investment and Challenges, April-May 2012

2

MENA Electricity Demand If current trends continue…

Source: APICORP Research, MENA Power Reassessed: Growth Potential, Investment and Challenges, April-May 2012

Electricity production capacity growth will outpace GDP growth Production capacity grows at 7.8% while regional GDP grows at 4.5%

By 2017: >120 GW new generation capacity needed at total cost of ~$250B 3

Evolution of MENA Energy Demand If current trends continue…

In 2010, ~60% of power generated using natural gas and ~37% using oil Limited renewables deployment, mostly hydro

If new, fossil capacity is required to meet unchecked demand… Significant budgetary strain on hydrocarbon importers Significant opportunity cost to hydrocarbon exporters

4 Source: APICORP Research, MENA Power Reassessed: Growth Potential, Investment and Challenges, April-May 2012

MENA Energy Demand

How does the region achieve a sustainable energy mix?

5

Meeting the MENA Energy Demand Challenge The strategy requires both supply and demand considerations DEMAND-SIDE MANAGEMENT (DSM)

SUSTAINABLE ENERGY SUPPLY

Base Case Electricity Demand

Reduced Demand with DemandSide Management

Aims at curbing electricity and water demand by using technical, regulatory, and information levers

Aims at having a diversified portfolio optimized to the specific country context

6

Meeting the MENA Energy Demand Challenge DSM Options

Energy Efficiency – related to technological solutions, such as efficient cooling systems, heater control, etc. Energy Conservation - related to consumer behavior

Conservation and Efficiency

Demand Response - load management or shifting efforts, related to electricity market and price signals Load Shifting

Peak Clipping 7

Meeting the MENA Energy Demand Challenge

Peak Demand (GW)

DSM opportunities – Saudi Example

USD $13.3B Net Savings Possible

Energy Efficiency Programs Efficient cooling in existing homes and buildings New construction efficiency (building insulation and a/c)

Demand Response Programs Direct load control Interruptible tariffs Curtailable load management 8 Source: Saudi Electricity and Co-Generation Regulatory Authority, Demand Side Management Programs, 2012

Meeting the MENA Energy Demand Challenge DSM opportunities – Abu Dhabi Example DSM with focus on reducing A/C demand and consumption in residential, commercial and institutional buildings External Exhaust Fans, Consumption, 1.6% Lights, 7.4% 0.1% Hot Water Boilers, 8.4%

Other Internal, 5.1%

> USD $4B Net Savings Possible

Chillers, 57.5%

Other Common Equipment, 11.8% Fan-Coil Units, 8.1%

Example of Electricity Consumption for Typical Building

9 Source: Municipality of Abu Dhabi City. ADM Energy Consumption Management Program in Existing Buildings, October 31, 2011

Meeting the MENA Energy Demand Challenge Demand management is the first step but not a silver bullet

Base Case Electricity Demand

Reduced Demand with Demand-Side Management

Residual demand to be met with sustainable supply

10

Sustainable Energy Supply Clean energy will play an important role in sustainable supply

Energy Mix Diversification Nat Gas (including CCS)

 Cost efficient  Low emissions

 Cost efficient for base load

Nuclear

 Clean  Reliable source

Renewables

 Decreasing costs  Environmentally friendly  Leverages abundant resources

11

Energy Mix Diversification with Renewables The Options and the Selection Criteria

Utility PV

Value chain opportunities

Human capital needs and availability

Economics of Hydrocarbons Saved

Energy Mix

Electricity and desalinated water demand patterns Waste-To-Energy

Rooftop PV

Regulatory and physical infrastructure requirements CSP w/ Storage

Wind (Onshore & Offshore)

Technology lifecycle costs Geothermal 12

Energy Mix Diversification with Renewables Significant Regional Opportunities 2,500

24 GW PV deployed (~3% electricity generation)

Solar Potential

50 0

40

30 12

Wind Potential

50% electricity 20 consumption supplied by wind 10 power by 2020 0

0

13 Source: MEED, The outlook for the Middle East power and renewable sectors, 2012

Energy Mix Diversification with Renewables Pursuing opportunities with targets 2020 renewable energy targets (selected MENA countries) 50 40 30

Source: MEED, The outlook for the Middle East power and renewable sectors, 2012

20 10 0

14

Achieving Regional Renewables Targets Holistic perspective is needed to catalyze action

Comfort with technology costs and reliability Understanding of renewables value proposition – avoided and opportunity costs Near and long-term renewables planning to achieve predictability, dispatchability, and availability where needed: • Resource forecasting and operational planning • Transmission and distribution • Generation flexibility and energy storage

Understanding of broader economic benefits of renewables deployment, including human capital development Identification and pursuit of local value chain opportunities Focusing of research and education on initiatives that create local value

Robust supply-side and demand-side policies that stimulate renewables deployment 15

Achieving Regional Renewables Targets Implementing a holistic approach Robust Regulatory and Fiscal Policy Framework

Deployment Perspective

Education

Innovation

R&D

Holistic Value Chain Perspective

Education

Investment Infrastructure Projects

• Captures energy security, environmental and initial economic benefits • Does not capture the complete set of possible direct and indirect economic opportunities

Innovation

R&D

Investment Infrastructure Projects

• Embraces renewable energy / sustainable technologies across all value chain • Creates “Green Economic Growth” at home and raises the positioning of the region at a global level 16

Achieving Regional Renewables Targets Net benefits of a holistic approach

Aim is for costs to be outweighed by economic benefits Magnitude and distribution of benefits are context dependent $$

Fossil Fuel Displacement

Costs

GHG Emission Direct and Reduction Indirect GDP Contribution

Benefits

Net Benefits 17

Achieving Renewables Targets in the UAE Engagement across the value chain

Holistic Energy Strategy

Working Together 18

Achieving Renewables Targets in the UAE Working together on all fronts – renewables resource assessment Founding Members

RE Atlas Data Layers

RE Atlas Outputs

RE Project Costs (LCOE)

19

Meeting the MENA Energy Demand Challenge Conclusions

MENA electricity demand is growing rapidly ~$250B in new generation capacity required in the next 5 years if demand grows unchecked

New fossil generation capacity based on natural gas and oil fuels Significant budgetary strain on hydrocarbon importers Significant opportunity cost to hydrocarbon exporters

Focus needs to be placed on demand side management and diversification of energy supply Renewables and nuclear can serve as complimentary sources of supply diversification

A holistic approach needs to be considered to capture the full economic benefits of renewables deployment 20

Meeting the MENA Energy Demand Challenge Conclusions

Success factors to drive renewables deployment Development and implementation of regulatory and fiscal policy frameworks • Transparent, stable, predictable and enforceable frameworks required

Quantification of technical potentials • Resource assessment site by site and grid availability to guide project development

Understanding of technology costs and benefits • Cost competitiveness from direct and opportunity perspectives

Access to financing • Financing conditions and structure are key to drive LCOE reductions and hence to reduce costs of renewables policies

Development of quality projects • Quality developers with good track records and sound power purchase agreements (PPAs) with transparent and stable terms

Development of Value Chain Opportunities • Economic diversification and renewable targets to drive development of local renewable industries, not only in manufacturing but also in services 21

THANK YOU

22